Assignment
1. The Hartford Symphony Guild is planning its annual dinner-dance. The dinner-dance committee has assembled the following expected costs for the event:
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Dinner (per person)
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$14
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Favors and program (per person)
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$7
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Band
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$1,800
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Rental of ballroom
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$1,100
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Professional entertainment during intermission
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$2,000
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Tickets and advertising
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$700
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The committee members would like to charge $49 per person for the evening's activities.
Required:
1. Compute the break-even point for the dinner-dance (in terms of the number of persons who must attend).
2. Assume that last year only 350 persons attended the dinner-dance. If the same number attend this year, what price per ticket must be charged in order to break even? (Round your answer to 2 decimal places.)
3. Refer to the original data ($49 ticket price per person). Prepare a CVP graph for the dinner-dance from zero tickets up to 450 tickets sold. (Use the line tool to draw three single lines (Total Sales Revenue, Fixed Expenses, Total Expenses). Each line should only contain the two endpoints. For the CVP Graph to grade correctly, you must enter the exact coordinates of each endpoint. Once all points have been plotted, click on the line (not individual points) and a tool icon will pop up. You can use this to enter exact co-ordinates for your points as needed. To remove a line/point from the graph, click on the line/point and select delete option.)
Cost-volume-profit graphTotal Sales (in Dollars)Number of Persons reset
• Total Sales
• Fixed Expense
• Total Expense
• Break Even Ponit
2. Walsh Company manufactures and sells one product. The following information pertains to each of the company's first two years of operations:
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Variable costs per unit:
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Manufacturing:
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Direct materials
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$ 27
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Direct labor
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$ 15
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Variable manufacturing overhead
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$ 4
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Variable selling and administrative
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$ 3
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Fixed costs per year:
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Fixed manufacturing overhead
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320,000
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Fixed selling and administrative expenses
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50,000
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• During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company's product is $56 per unit.
Required:
1. Assume the company uses variable costing:
a. Compute the unit product cost for year 1 and year 2.
b. Prepare an income statement for year 1 and year 2.
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Walsh Company
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Income Statement
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Year 1
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Year 2
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Variable expenses
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Total variable expenses
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Fixed expenses
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Total fixed expenses
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Net operating income (loss)
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2. Assume the company uses absorption costing:
a. Compute the unit product cost for year 1 and year 2. (Round your answer to 2 decimal places.)
b. Prepare an income statement for year 1 and year 2. (Round your intermediate calculations to 2 decimal places)
3. Reconcile the difference between variable costing and absorption costing net operating income in year 1 and year 2.
3. Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution margin for one unit of each product follow:
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Product
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A
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B
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C
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Selling price
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$ 300
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$ 440
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$ 360
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Variable expenses:
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Direct materials
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30
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66
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36
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Other variable expenses
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150
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154
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198
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Total variable expenses
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180
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220
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234
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Contribution margin
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$ 120
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$ 220
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$ 126
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Contribution margin ratio
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40
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50
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35
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The same raw material is used in all three products. Barlow Company has only 4,600 pounds of raw material on hand and will not be able to obtain any more of it for several weeks due to a strike in its supplier's plant. Management is trying to decide which product(s) to concentrate on next week in filling its backlog of orders. The material costs $6 per pound.
Required:
1. Compute the amount of contribution margin that will be obtained per pound of material used in each product.
2a. Compute the amount of contribution margin on each product.
2b. Which orders would you recommend that the company work on next week-the orders for product A, product B, or product C?
Product A
Product B
Product C
3. A foreign supplier could furnish Barlow with additional stocks of the raw material at a substantial premium over the usual price. If there is unfilled demand for all three products, what is the highest price that Barlow Company should be willing to pay for an additional pound of materials?
4. Imperial Jewelers is considering a special order for 14 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $406.00 and its unit product cost is $267.00 as shown below:
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Direct materials
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$ 144
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Direct labor
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87
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Manufacturing overhead
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36
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Unit product cost
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$ 267
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Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $12 of the overhead is variable with respect to the number of bracelets produced. The customer who is interested in the special bracelet order would like special filigree applied to the bracelets. This filigree would require additional materials costing $11 per bracelet and would also require acquisition of a special tool costing $457 that would have no other use once the special order is completed. This order would have no effect on the company's regular sales and the order could be fulfilled using the company's existing capacity without affecting any other order.
Required:
What effect would accepting this order have on the company's net operating income if a special price of $366.00 per bracelet is offered for this order? (Enter all amounts as positive values.)
Should the special order be accepted at this price?
Yes
No